7 Credit Score Myths Indians Believe That Are Costing Them Money

By Nitish Bharadwaj · Published Jun 18, 2026 · 5 min

Widespread misconceptions about credit scores in India cause borrowers to make avoidable financial mistakes — avoiding score checks for fear of damage, believing salary affects the score, assuming debit card usage builds credit history, or thinking closing old cards improves the score. This article addresses seven prevalent myths with the actual CIBIL and RBI rules, explaining what genuinely influences scores and what has no effect whatsoever on creditworthiness calculations.

Credit score myths are surprisingly expensive. Believing the wrong thing can cost you lakhs in higher interest over a lifetime. Here are the 7 most widespread myths among Indian borrowers — and the truth that replaces each of them.

Myth 1: Checking My Own Score Hurts It

FALSE. Checking your own credit score (called a soft inquiry) does NOT affect your CIBIL score. Only hard inquiries — when a lender checks your score after you apply for credit — can slightly lower it by 5–10 points. Multiple applications in a short period can compound this damage. Check your own score as often as you like. It is free once a year at cibil.com.

Myth 2: Closing Old Credit Cards Improves My Score

FALSE. Closing old cards typically hurts your score in two ways: it reduces your total credit limit (which raises your utilisation ratio), and it shortens your average credit history. Keep old cards alive with a zero balance unless they charge an annual fee you cannot justify. See the full 6-month improvement plan for how credit age fits into recovery.

Myth 3: A Loan Rejection Drops My Score by 100 Points

FALSE. A rejection itself does not lower your score — only the hard inquiry the lender made before rejecting you does, by 5–10 points. Multiple applications in a short period create multiple hard inquiries which compound. Apply to one lender at a time, strategically and selectively.

The Remaining 4 Myths

• Myth 4 — Zero debt means a perfect score: FALSE. You need active credit usage and on-time repayment. No credit history means no score, which also blocks loan approvals.
• Myth 5 — Salary level affects CIBIL score: FALSE. Income is not part of the CIBIL score calculation. A ₹20,000 per month earner can have 800 CIBIL; a ₹1 lakh earner can have 600.
• Myth 6 — Settling a loan is the same as repaying it: FALSE. Settled means negotiated for less than the full amount. It stays on your report as a negative for 7 years. Always pay the full outstanding amount.
• Myth 7 — My spouse's bad score affects mine: FALSE. Credit scores are strictly individual in India. Only joint accounts or loan guarantees create a linkage between two people's scores.